Canada

Canadian Home Buyers Now Need To Earn $150,000 Per Year To Buy A “Typical” Home

You did it! You convinced your parents to gamble their retirement by pitching you a downpayment. Now all you need is to qualify to carry a mortgage, right? That might be a problem according to Q1 2022 data from National Bank of Canada (NBF). Carrying a mortgage on a typical home now requires a minimum income 50% larger than the median family currently makes. That’s across Canada’s cities too, not Toronto or Vancouver. A typical home in those cities requires closer to a quarter mil per year.

Lifestyles of the rich and famous bungalow owners, right?

Your Household Needs To Earn $154k/Year To Own A Typical Home

Canadian real estate is experiencing the worst affordability in over a generation. It worsened 4.9 points in Q1 2022, marking the biggest deterioration in over 27 years. According to the bank, affordability over the past year eroded at the fastest pace in at least 40 years.

A typical home now requires more than half a household’s family income for the first time since the early 90s. If you’re thinking well, at least it’s been this bad before — not exactly. Canada is an older country now, so the median income slants higher to more experienced (likely) homeowners. Since you’re probably younger than the median, you most likely make less. More succinctly worded, younger buyers likely have it a lot worse today. 

Alright, Egghead — what does that mean? A typical household needs to earn $154,400 in annual income just to be able to afford to service the mortgage in Q1 2022. That’s an increase of 18.0% (+$23,500) from last year, so hopefully your household income jumped by a fifth.

Remember, this is after the downpayment is secured and assumes you have no other debt. Regular loan payments, such as a car or student loan? You’ll need more income.

Toronto Or Vancouver Mortgages Need At Least $211,600 Per Year

Yes, those previous numbers were for a typical home across Canada’s major cities. If you want something in Toronto or Vancouver, you’ll need a lot more. Toronto required a minimum household income of $211,600 per year as of Q1 2022, up 23.2% (+$39,800) from last year. Vancouver is even a little steeper at $228,600, up 18.6% (+$35,800) over the same period.

To be brutally honest, most young people in Canada will never be able to own a home in these two cities. Households need more than double the median income just for the mortgage payments on a typical home. If you’re not a high earner but still want a home, may we suggest somewhere more affordable — like New York City?

Canadian Household Income Required For A Typical Home

The minimum income required to buy a typical home in Canada’s major cities in Q1 2022.

Source: NBC, Better Dwelling.

Hamilton and Victoria Real Estate Doesn’t Provide Much Relief

Toronto and Vancouver residents were flooding smaller cities before 2020. However, prices have increased much faster than the cities they fled, making it a much less attractive escape. Hamilton, Ontario now requires a minimum annual household income of $183,300, up 26.8% (+$38,700). Victoria, BC reached a little higher at $190,400, up 5.8% (+$10,500) from last year. Cheaper than Toronto or Vancouver, but still nearly double the median income. 

Canada’s Most Affordable Cities Are Quebec & Winnipeg

The most affordable cities to buy in are now Quebec and Winnipeg. In Quebec City, a household income of $69,900, up 11.3% (+$7,100), is still enough to carry a mortgage across the country. Feeling rich? Splurging on pricier Winnipeg only requires a median household income of $79,800, up 12.7% ($9,000) from last year.

Most likely a lot of questions about what happens next with higher interest rates. Typically higher interest rates will increase the cost of debt servicing. If prices don’t fall faster than mortgage rates rise, affordability worsens. However, higher interest rates also slow demand and erode leverage.

Investors, about a third of buyers, will find housing much less attractive. Especially negative cash flow ones, that have been relying on appreciation. They’re more likely to realize some of their profits and put their excess property one the market. More supply with less leverage means lower prices. This is distinct from more supply with higher leverage, which can increase prices.

More succinctly, affordability will erode in the short-term but will improve long-term. This level of disconnect has never lasted forever, and this time isn’t different.

9 Comments

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  • Reply
    Ron Bruce 3 days ago

    When Canadians can’t compete economically on the global stage in any particular industry, what jobs qualify for an income of over $150,000? We can’t all work in the Senate.

    Relying on depleting resources hasn’t been a good decision in any Province. And speculation for a few only lasts for so long.

  • Reply
    Andre 3 days ago

    Import enough of the developing world and you’ll eventually import the inequality and lack of upward mobility those people were trying to escape in the first place. Well played Canada, well played.

  • Reply
    Jane 24 hours ago

    Any data on Halifax, Nova Scotia?

  • Reply
    Jeff 2 hours ago

    This article seems somewhat misleading. Yes, the housing prices are high but this makes homeownership seem impossible for young people. Why not advertise what it takes in income to own a starter condo, which is where we all begin. It’d be considerably less income and not as newsworthy I’m guessing….

    • Reply
      Terry 30 mins ago

      Yes, the composite is misleading. How dare any statistics not exist that aren’t about your demographic specifically.

      Only an idiot doesn’t realize if single-family home prices are rising at double the rate of condos, you’ll never catch up. Call it what it is — a bubble.

      • Reply
        Jeff 9 mins ago

        I am nearing retirement and own 3 homes. So this is not my demographic. And SFDs are appreciating at the same rate as condos in most markets in Canada last I checked.

        I’m merely pointing out the sensationalism of the “average home” costs and the people most discouraged by such stats, which are the renters/first time buyers. And which, btw is the buyer demographic this article begins with. It’s just more negative than it needs to be.

        I do not believe we are in a bubble either. Just the new reality of the ebbs and flows of the Canadian Real Estate market.

        • Reply
          GTA Realtor 5 mins ago

          For it to not be a bubble, only the top 10% of incomes will ever be able to own (this is all of Canada including condos, not toronto composite).

          It makes no sense and most honest Realtors will agree.

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